Updated voices from the field

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THE iMPAcT Of LARGER-scALE AGRicULTURAL iNvEsTMENTs ON LOcAL cOMMUNiTiEs:

Updated voices from the field

AGRicULTURE GLOBAL PRAcTicE DiscUssiON PAPER 12

WORLD BANK GROUP REPORT NUMBER 114431-GLB

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The ImpacT of Larger- ScaLe agrIcuLTuraL

InveSTmenTS on LocaL communITIeS:

updated voices from the field

FOOD AND AGRICULTURE GLOBAL PRACTICE DISCUSSION PAPER 12

April 2017

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Telephone: 202-473-1000; Internet: www.worldbank.org Some rights reserved

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Cover photo: Asuka Okumura, Pablo Daniel and Christopher Brett.

Picture on page 16: Duncan Pringle

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Table 5.1: Summary of Good and Poor Practices Affecting Technology Transfer in Operations Surveyed 40 Table 6.1: Summary of Good and Poor Strategies or Actions in Cases of Resettlement at Operations Surveyed 45 Table 7.1: Summary of Good and Poor Practices for Environmental Impact in Operations Surveyed 51 FIGuRES

Figure 1.1: Descriptive Statistics of Stakeholders Interviewed 4

Figure 3.1: Share of Positive and Negative Impacts Mentioned in Employee Interviews 22 Figure 3.2: Perceptions of Employment and Related Conditions, Employee Interviews 23 Figure 4.1: Share of Positive/Negative Impacts Mentioned in Interviews with Retail Owners 35 Figure 5.1: Share of Positive/Negative Impacts Mentioned in Outgrowers Interviews 40 Figure 6.1: Share of Positive/Negative Socioeconomic Impacts Mentioned by Resettled Persons 42 Figure 7.1: Perceptions on Environmental Impact, All Stakeholder Interviews 48 Figure 7.2: Perceptions of Impact on Water, All Stakeholder Interviews 50 bOxES

box 1.1: Key Publications and Outputs by the IAWG on Responsible Agricultural Investment 2 box 1.2: Selected Internationally Recognized Principles and Guidelines for Responsible Agricultural Investment 3

box 1.3: Definition of Stakeholders in This Report 5

box 3.1: An Example of an Internal Promotion 25

box 3.2: Impact of Employment on Women 28

box 3.3: Examples of Company Initiatives to Increase the Number of Local Workers 29

box 4.1: An Example of How Employment Impacts on Livelihoods 32

box 4.2: Infrastructure Development by Investors 34

box 5.1: A Microfinancing Partnership for Farmers’ Associations 39

box 6.1: Uses of Resettlement Compensation Money 43

box 7.1: Impact of Chemical Usage and Water Infrastructure 49

box 7.2: Common Solutions to Common Problems 49

box 7.3: Concerns on Water Contamination 50

box 8.1: Examples of Social Development Programmes 53

box 8.2: An Example of a Social Development Programme Cut Due to Financial Constraints in Tanzania 54

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acknowLedgmenTS

This report was written by William Speller, Hafiz Mirza, Axèle Giroud, Jacqueline Salguero Huaman, Gra- hame Dixie, and Asuka Okumura. The team was led by Hafiz Mirza and Grahame Dixie and, in addition to the authors, consisted of Duncan Pringle, Abye Tasse, and Teoh Cheng Hai (consultants). It was researched and pre- pared by a joint United Nations Conference on Trade and Development (UNCTAD)–World Bank team under the overall direction of James Zhan (UNCTAD), and Preeti Ahuja (World Bank).

Hafiz Mirza, Grahame Dixie, William Speller and Dun- can Pringle devised and oversaw the research framework and methodology. The fieldwork was conducted by Dun- can Pringle, Teoh Cheng Hai, Abye Tasse and William Speller. Asuka Okumura provided research and logistical support in arranging the fieldwork. Jacqueline Salguero Huaman and William Speller were responsible for input- ting the fieldwork results into Nvivo; and interrogation of the Nvivo database and data analysis was primarily by Jacqueline Salguero Huaman, William Speller and Axèle Giroud.

Peer review and valuable insights were provided by Karol Boudreaux, Jonathan Mills Lindsay, Louis Philippe Mous- seau, Gregory Myers, Loraine Ronchi and Geoff Tyler.

Hafiz Mirza (UNCTAD), and Christopher Ian Brett and Harideep Singh (World Bank) also provided overall guidance and oversight to the preparation of the final report.

Many companies, communities, and external stakeholders provided their invaluable time in order to allow this study to happen.

The World Bank and UNCTAD are also indebted to the government of Japan for funding this work and for their support.

Note: the agribusiness investments subject of the research undertaken in this study were not financed or supported by the members of the Inter-Agency Working Group (IAWG).

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CEO Chief Executive Officer

CFS Committee on World Food Security FAO Food and Agricultural Organization IAWG Inter-Agency Working Group IFAD International Fund for Agricultural

Development

IFC International Finance Corporation IFC PS International Finance Corporation

Performance Standards

IISD International Institute for Sustainable Development

LIST of abbrevIaTIonS

ILO International Labour Organization MoU Memorandum of Understanding MZN Mozambican metical

NEC National Environmental Council NGO Nongovernmental organization RAI Responsible Agriculture Investment UNCTAD United Nations Conference on Trade

and Development

USAID United States Agency for International Development

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ChAPTER OnE

InTroducTIon and key fIndIngS

1.1 background and objecTIveS

In the wake of the food price crisis of 2008, rising commodity prices and the collapse of financial markets caused a significant increase in private sector interest in agricultural investment. It raised international concern that agricultural investment involving large-scale land acquisition could have negative impacts on local communities. On the other hand, it was recognized that there may be the potential for positive impacts from such investments. The gaps in knowledge on the overall effects of such investments prompted the need to examine this topic. In light of this, endorsed by the UN General Assembly, G8 and G20, the Inter-Agency Working Group (IAWG) was set up by FAO, IFAD, UNCTAD and the World Bank in 2009. The IAWG was tasked to examine this topic in order to improve understanding of the impacts of such investment and to provide broader recommendations on the appropriate conduct of “responsible”

agricultural investment.

Through this programme, the IAWG has sought to distill and disseminate the lessons from past and current agricultural investments to understand what works and what does not work for host countries, local communities, investors, and other parties impacted by agricultural investments (Box 1.1). The lessons emerging from this body of work have supported and informed a set of responsible investment principles, including but not limited to the Committee on World Food Security (2015).¹

Under the umbrella of the IAWG programme, UNCTAD and the World Bank con- ducted a study and reported the findings in “The Practice of Responsible Investment Prin- ciples in Larger-Scale Agricultural Investments: Implications for Corporate Performance and Impact on Local Communities (UNCTAD and World Bank, 2014).” That study was based on a field survey of agricultural investors, local communities and other stakeholders. First- hand information was obtained through on-site 240 interviews with 550 stakeholders

1 Selected internationally recognized principles for responsible agricultural investment, including Environmental and Social Framework—Setting Environmental and Social Standards for Investment Project Financing (World Bank), are listed in Box 1.2.

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associated with or impacted by a set of 39 private companies in Sub-Saharan Africa and South East Asia.

Job creation was the most frequently cited benefit arising from the investments. The most frequently noted negative impact on local communities was the reduced access to land. Investments that had the most positive impacts on the host economies and were well-integrated with the development vision of the host country also tended to be financially and operationally successful. The above referenced report summarized lessons learned and good practices identified. It should be noted that the private agribusiness investments covered by this study were not financed or supported by the members of the Inter- Agency Working Group (IAWG), including UNCTAD or the World Bank.

This report is an update to the above mentioned UNCTAD/World Bank study (the “first phase”). Follow- ing that researchers revisited eight operations in four countries (Cambodia, Ethiopia, Mozambique and Tanzania), conducting a total of 113 detailed additional interviews with 349 stakeholders primarily from local communities in which the agribusiness operations are based. This

report presents an updated set of findings based on these follow-up interviews; as this report is not a stand-alone piece, it should be treated as supplemental material to the original study, and the findings contained in the two reports should be viewed in unity. Accordingly, the tables in Section 1.3 of this report provide an updated version of the tabular summary findings from the first phase report that have been augmented and revised based on findings from the additional fieldwork.

The main intention behind the second phase of fieldwork was to deepen and enrich the data sample and information collected, by conducting further interviews in order to augment, challenge and/or verify the findings of the original study. In the second phase, research teams spent more time with local communities and other stakeholders (interviewees are referred to as “external stakeholders”²) which had not been possible in the first phase, due to time and resource limitations.

2 That is “external to the investor,” especially people in communities connected directly or indirectly to the operation. Contract farmers working for the investor, as well as employees are included. These types of relationships with the operation are indicated where appropriate in the report.

bOX 1.1. key pubLIcaTIonS and ouTpuTS by The Iawg on reSponSIbLe agrIcuLTuraL InveSTmenT

1. World Investment Report 2009: Transnational Cor- porations, Agricultural Production and Development (UNCTAD 2009)

2. Principles for Responsible Agricultural Investment That Respects Livelihoods and Resources—Extended version (FAO, IFAD, UNCTAD and World Bank, 2010) 3. Making the Most of Agricultural Investment (FAO and

IIED, 2010)

4. Outgrower Schemes—Enhancing Profitability (IFAD and Technoserve, 2011)

5. Investing in Agribusiness: A Retrospective View of a Development Bank’s Investments in Agribusiness in Africa and Southeast Asia and the Pacific (World Bank, 2013)

6. Trends and Impacts of Foreign Investment in Develop- ing County Agriculture Evidence from Case Studies (FAO, 2013)

7. The practice of Responsible Agricultural Investment Principles in Larger-Scale Agricultural Investments (UNCTAD and World Bank, 2014)

8. Impacts of Foreign Agricultural Investment on Devel- oping Countries: Evidence from Case Studies (FAO, 2014)

9. Challenges and Opportunities of FDI in Developing Country Agriculture for Sustainable Development (FAO, 2014)

10. Investment Contracts for Agriculture: Maximizing Gains and Minimizing Risks (IISD, UNCTAD and World Bank, 2015)

11. Home country measures that promote responsible for- eign agricultural investment: Evidence from selected OECD countries (FAO, 2016)

Note: Full details of these publications are in the references.

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This updated report seeks to describe in a more nuanced manner the perceived impacts arising from associated agribusiness investments, including spillover effects on the local community and more widely—whether intended or unintended. Given the complexity of impacts,³ these cannot be regarded simplistically as ‘good to be recom- mended’ or ‘bad to be corrected’; nevertheless, they offer essential ground-level insights from which to deepen understanding of outcomes and draw lessons.

A secondary objective of this phase was to assess how the investment impact may have altered between the first and this phase. As such, throughout this report reference is made to observations and anecdotal evidence on the evo- lution of the impact of the agribusinesses studied. Given the limited sample size, this does not constitute a system- atic or comprehensive analysis. Nevertheless, information on changes observed between researchers’ first and second site visits provides important insights into the policies and practices that tend to affect project impacts as the investment evolves.

3 In this work, the term impact is used to denote the changes observed and identified by qualitative interviews with the stakeholders themselves and does not refer to outcomes of an ‘impact assessment’ with random samples and controls.

The voices from the field are providing stakeholder observation on how the investments have affected an array of variables discussed in the previous report and this one.

1.2 daTa coLLecTIon and meThodoLogy

The second phase of fieldwork on which this report is based was conducted in 2014 and 2015. Researchers spent 2 to 3 days interviewing a wide range of external stakeholders for each investment. This is in addition to the interviews with stakeholders and management conducted during the first phase visit to each site (in 2012–2013). The second phase visits were specifically focused on interviewing a wider range and a greater number of external stake- holders. Interviews at each location focused on a selected set of issues which were deemed to be the most important from the first study, or from subsequent information obtained.

This approach facilitated a greater depth and targeting of pertinent issues at each location; care was taken in selecting issues at each investment in order to ensure sufficient coverage across the sample as a whole.

The choice of the eight investments from the original thirty- nine was made based on potential to obtain more detailed information on the issues of focus described above.⁴ Dis- cussions with management were limited to updates on the

4 Resource limitations did not permit this, but ideally a greater number of investments would have been revisited. This would have allowed the research team to obtain a larger number of interviews, and wider variance of views on issues of importance or concern.

bOX 1.2. SeLecTed InTernaTIonaLLy recognIzed prIncIpLeS and guIdeLIneS for reSponSIbLe agrIcuLTuraL InveSTmenT

1. Committee on World Food Security, Principles for Responsible Investment in Agriculture and Food systems—CFS—RAI, 10 principles (CFS, 2015)

2. Environmental and Social Framework—Setting Envi- ronmental and Social Standards for Investment Project Financing (World Bank, 2016).

3. Environmental and Social Performance Standards and Guidance Notes—8 Performance Standards (IFC, 2012)

4. Food and Agriculture Business Principles—UN FABs, 6 Principles (UN Global Compact, 2014)

5. Guidance for Responsible Agricultural Supply Chains (FAO and OECD, 2016)

6. Operational Guidelines for Responsible Land-Based Investment (USAID, 2015)

7. Principles for Responsible Agricultural Investment (PRAI)—7 Principles (UNCTAD, FAO, IFAD and World Bank, 2010)

8. Respecting Land and Forest Rights—a Guide for Companies (Interlaken Group and RRI, 2015)

9. Voluntary Guidelines on the Responsible Governance of Tenure of Land, Fisheries and Forests in the context of national food security—VGGT (FAO, 2012)

Note: Full details of these principles and guidelines can be found in the sources and publications indicated in parentheses.

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operations to set the context for stakeholder interviews.

Figure 1.1 provides a number of descriptive statistics.

In line with the methodology from the first phase of fieldwork, the main approach taken in the second phase was to allow communities and other stakeholders to express their views in areas they deemed of significance (Section 1.2).

Researchers subsequently focused on specific issues on which more data were sought, specifically: employment (Chapter 3), rural development and economic linkages (Chapter 4), technology transfer (Chapter 5), relocation and resettlement (Chapter 6) and environmental impact (Chapter 7). In addition, recurrent themes throughout the discussions were the operational and financial success of investors (Chapter 2) and the role of government in infrastructure and social services (Chapter 8).

Stakeholder interviews were conducted on a confidential and anonymous basis, without the presence of representatives from the investor. Since confidentiality was assured to interviewees, no specific individuals and organizations are referred to in this report. The interviews were obtained independently of the investor. Interviews com- menced with the same open-ended questions used in the first phase of field research, to enable comparability.

Researchers subsequently asked follow-up questions based on key areas of specific focus chosen for the location (or issues which emerged from the open-ended questions).

The write-ups of stakeholder interviews were imported into Nvivo, a software package designed for the analysis of large amounts of qualitative and quantitative data.

This allowed the researcher to classify the data according

Resident near

investment Migrant Employee Supplier/

Customer Previous

land user Resettled

person Local minority

group Outgrower/

Contract farmerCooperative Gov. official Community

leader NGO/MFI

Number of people interviewed per country

Cambodia 48

87

88 126

Ethiopia

Tanzania

Mozambique

30 63

20

Number of interviews by gender

Female Male

Mixed group

Characteristics of stakeholders interviewed

102

73

51

16 14 13 12 11 11 8 5 1

Source: UNCTAD-World Bank Survey of Responsible Agricultural Investment Database.

Notes: (a) A previous land user refers to a local stakeholder who utilized the land for cultivation or cattle and grazing purposes. Displaced people are considered under the category resettled people.

(b) Supplier/Customer refers to any local stakeholder with regular direct sales such as supplying input to the investor or who is a regular buyer of local produce. Outgrower is separately considered as outgrower/contract farmer. (c) The characteristics above are not necessarily mutually exclusive, but a principal designator is indicted for each interviewee. (d) Less NGOs were interviewed than in the first study because this follow-up study is primarily focused on the collection of voices from local communities.

FIGURE 1.1. deScrIpTIve STaTISTIcS of STakehoLderS InTervIewed

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to particular themes (for example, employment, resettlement, commodity prices paid to outgrowers) and facilitated the quantification of qualitative information on socioeconomic and environmental impacts obtained during the stakeholder interviews.⁵ This was in addition to a pure qualitative assessment of the extensive information received during the fieldwork. Such an approach permit- ted an assessment of the relative importance of various types of investment impact which would otherwise not

5 In the case of qualitative research, especially in sensitive areas such as agriculture and food security, there is always the danger that a researcher may let their views prejudge analysis and findings, often unknowingly; hence the advantages of using programmes such as NVivo to quantify the balance of positive and negative views. This provides a number to guide researchers’ views and circumnavigate the human tendency to place more emphasis on information in line with preformed views. This research has not attempted to apply any scoring of the views. In our view this would be a step too far with the data collected and the methodology used. The reader should be aware that there is no weighting applied to these perceptions, although obviously some issues are much more important than others in the minds of respondents. This could be an aspect taken up by other research and analysis, including by UNCTAD and the World Bank.

have been possible, especially in the context of the first study and other research. This approach is intended to strengthen the findings presented in this report, but ulti- mately such findings should be used in a considered way, recognizing the contingencies involved (Box 1.3).

1.3 key fIndIngS and recommendaTIonS

As mentioned above, the main purpose of the fieldwork on which this report draws was to return to a number of the matured agricultural investments visited previously in order to establish whether earlier conclusions and recommendations were robust and held up to scrutiny. This was achieved by revisiting communities and other stakeholders at 8 investments, spending more time with a larger number and more diverse set of interviewees, and ensuring that they had ample opportunity to voice their views on both positive and negative perceived outcomes arising from the investments. A number of specific topics less well

bOX 1.3. defInITIon of STakehoLderS In ThIS reporT

Many of the terms used in this report have different mean- ings or implications depending on the context. This box outlines how these terms are used within the context and limited scope of this report.

Agricultural investment: A project which changes the fixed capital stock in the agricultural production process. In this report, this includes projects of agribusinesses which are operated by incorporated companies (corporates) or individuals who neither live on the land nor rely on it for survival, i.e., we exclude smallholders’ investment in their own farms from the definition of investment because this is not within the scope of this report.

Investor: The corporation(s) or individual(s) implement- ing the agricultural investments defined above, include both foreign and domestic investors. In some cases, such as family businesses, the ultimate owners of the project are also those responsible for its implementation. In other cases, such as publicly listed companies or investment funds, the ultimate owners are disparate and hence investor refers to the company implementing the projects visited.

Governments: In this report, we mostly focused on fed- eral or national governments. However, other levels of governments such as regional and local are equally important to enable responsible agricultural investments. Notably, functional cooperation among them is crucial.

Civil society: Nongovernmental organizations and insti- tutions include national, regional and local entities.

Outgrower: A person not employed directly by the inves- tor who supplies the agricultural investment with produce cultivated on her or his own land. This involves a variety of contractual arrangements as discussed in the body of the report.

External stakeholder: Person interviewed during the course of the research who has been affected by the investment operation. This includes not only local communities, but also suppliers, employees, government officials and other individuals and groups (e.g., local retailers, hospi- tal staff and others directly or indirectly impacted by the investment).

Source: UNCTAD-World Bank Survey of Responsible Agricultural Investment Database.

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covered earlier (namely, employment, technology transfer, environmental impact, resettlement, economic spillover and rural development, and the provision of social and infrastructure services) were also investigated as were how conditions and outcomes had evolved since the first visit.

The findings of this follow-up research are therefore supplemental to those of the original World Bank- UNCTAD study: The Practice of Responsible Investment Prin- ciples in Larger-Scale Agricultural Investments. The findings, dis- cussed in more detail in the sections below, are essentially in line with the first phase of fieldwork, but more nuanced, detailed and wider in scope. Tables 1.1 and 1.2 below provide an update to the key summary tables from the original report, augmented and refined in light of the findings from the latest fieldwork. Recommendations in the new tables are based upon two phases of surveys as well as desk research and other analyses conducted under the IAWG programme. For instance, although technology transfer to suppliers (and spillovers to other farmers) may arise as a key outcome from an investment, the second fieldwork underlines that the types of technology being imparted are not always suitable for local farmers because of local conditions; for instance, they may not have the necessary finance, skills, equipment or experience/capabilities to utilize it.⁶

6 The lesson to take from this may be to take action to improve conditions, rather than forgo the investment or discourage technology transfer.

As before, the perception of the impacts of these investments by members of the surrounding communities was on average significantly more positive than negative, but clearly there is a multiplicity of views and perceptions; and large differences prevail between different investments.

For each investment, particular issues are discerned dif- ferently by communities, which reflects the specificities of operations and local conditions, but is also indicative of communities’ ability overall to carefully and judiciously distinguish the pros and cons of each issue, and not paint everything “black or white.” Various shades of grey are more likely in complex interactions which encompass economic, social and environmental impacts. The diversity of findings provides lessons, good practices, and actions to avoid, which can be used for guiding responsible agricultural investments.

As a next step based on the findings of the combined study referred to in this report and other IAWG work, the IAWG plans to develop and disseminate more detailed and practical guidance which would assist with the implementation of responsible agricultural principles on the ground, and tools for the capacity building of various stakeholders on pertinent topics.

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A. SELECTED KEY LESSONS FOR INVESTORS Communication

and transparency

• Consultations were a key step in developing a strong relationship with local communities.

• Initial consultations were time consuming and expensive, particularly for new investments.

• Consultations were most effective when investors took primary responsibility; instead of “outsourc- ing” to host governments or land agents.

• A lack of transparency could generate fear and uncertainty about investor intentions and also open the door for unfounded criticism.

• Formal grievance mechanisms contributed to better relations with local communities.

• Resettlement management process could benefit from robust communication, consultation and transpa rency about the process.

• Management of expectations was crucial, such as with regard to job creation.

• Unfulfilled commitments and unmet expectations were particularly damaging for relations with communities.

Due diligence and business planning

• Business plans provided by a host government instead of an investor were often based on unrealistic assumptions and weak assessments of environmental factors.

• Some problems were foreseen if findings from impact assessments and community consultations were properly incorporated into business plans.

• Some investors had success in phasing their investment. That is, obtaining a small land area initially and only seeking more land once the first allocation is running successfully.

Financial and operational success

• Agricultural investments that were financially and operationally successful were more likely to be well-regarded by local communities.

• Patient sources of capital and financial backers who were cognizant of the difficulties of running an agribusiness were more reliable.

Land rights and resettlement

• Many investors were expending significant resources dealing with disputes over access to land.

• It was unrealistic for the investor to assume that the land acquired was free from any existing land disputes or land legacy issues.

• A fair and transparent process for negotiation and compensation helped to minimize the negative impact of resettlement.

• Some investors found that the best solution was to leave communities in situ and work with or around them, rather than undertaking difficult resettlement procedures.

• Failure to develop the land in accordance with expectations was a significant source of tension between investors, local communities and host governments.

Environmental impact

• Environmental impact assessments led to poor outcomes when they were conducted by host governments or land agents on the investor’s behalf.

• Impact assessments were too often “box-ticking” exercises, for local legal compliance, and not incorporated into the business operations.

• More assessment and monitoring was needed for the impact of the investment on water resources.

• Some investors took on responsibility for raising local awareness of environmental issues.

Social development programmes and financially inclusive business models

• Social or rural development initiatives produced better outcomes if they were agreed on through an inclusive, consultative approach to understand local development visions.

• Programmes that were fully funded and not dependent on profitability of the investor were most successful.

• Financially-inclusive business models were successful in forging partnerships with local communities.

Table 1.1. Updated

^a

key lessons for investors, host governments and other stakeholders

(a) Updated information is highlighted in italic. (continued)

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A. SELECTED KEY LESSONS FOR INVESTORS Employment and

working condition

• There was a pressure to employ local people; doing so contributed to better working relationships, but it could be challenging due to skills gaps.

• Training programmes which helped integrate local communities into the workforce were highly valued by employees.

• Some investors were paying inadequate wages and offering unacceptable working conditions, leading to tension between staff and the investor.

• There was a gender imbalance in most investments, though some investors have taken actions to improve the situation.

• Investors often start businesses in areas where formal employment and the contracting process is not known or well-established.

• Investments could be a catalyst for social transformations, especially of women’s and youth’s place in society by providing employment opportunities.

• Some investors had increased women’s integration into the workforce through preferential hiring, training and internal promotion programmes.

• Having been employed and gaining income, some women could increasingly contribute to the family budget and activities such as education.

• Some investments attracted educated young professionals from outside of the area as well as retained those originally from the area who otherwise might have migrated to the cities to find a job.

Outgrower schemes • Outgrower schemes were most successful when the business model was defined before outgrowers were introduced.

• A lack of transparency and inclusivity of outgrowers in the pricing mechanisms for their crops hin- dered the successful operation of outgrower schemes.

• Marginalised groups and women, were less likely to participate in outgrower schemes.

• Funding and partnerships with various stakeholders such as local governmental agencies or experienced NGOs played an important role.

Food Security • The main positive contribution to food security was through direct employment and outgrower schemes.

• The main negative aspect was deemed to be through reduced access to land.

Technology transfer • Technology transfer occurred primarily through training, particularly of outgrowers.

• The impact varied substantially from site to site, depending on the business model, crop and other factors.

B. SELECTED KEY LESSONS FOR GOVERNMENTS Prescreening

and selection of investors

• In many cases, prescreening of foreign investors could be improved to increase the prevalence of investors likely to make a positive contribution to the host country.

• More foreign investors were adopting social development programmes or financially-inclusive business models. Host governments would be advised to seek commitments on such aspects in advance.

Conduct of consultations, impact assessments and business plans

• The conduct of consultations, impact assessments, due diligence and the creation of business plans were most effective when primarily the responsibility of the investor instead of the government.

Phasing of investors and approvals

• Many investors were not putting their land allocation to full use. It would have been advisable for governments to consider to phase a project and seek commitments from investors about the pace at which the operation would have developed.

• Large land allocations, particularly to investors introducing new crops, could be fairly risky. Investors could have been required to phase their programmes in stages.

• Some governments had allowed foreign investment in agriculture to proceed at a faster pace than their capacity to realistically assess and monitor the investors.

TAbLE 1.1. conTInued

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B. SELECTED KEY LESSONS FOR GOVERNMENTS Ongoing monitoring

of investors

• Ongoing monitoring of investments could be strengthened.

• The better approaches were not solely productivity-focused, but more intensive and including monitoring of the socioeconomic impacts of an investment.

• Monitoring of investors’ environmental impact, including use of water resources, and adherence to environmental regulations was in most cases inadequate.

Operating environment

• A stable host country operating environment is a key determinant of investors’ success. Sudden, drastic changes in the host country operating environment, especially trade legislation could be particularly damaging.

• A clear regulatory framework for land acquisition approvals and a formalization of local communities’ tenure rights under a registry system contributed to reducing the risks of land disputes.

• Unclear land laws create situations of conflict over land rights especially where customary land was concerned.

• Business models with low land needs, such as processing operations, could provide important employment and development benefits.

• Resettlement processes should be handled adequately, with communication, consultation and transparency about the process for resettlement.

• Clear, transparent procedures to follow and standard valuations for compensation in the case of resettlement could be developed. Adherence needed to be monitored effectively.

Employment and contribution to rural livelihoods

• Governments should have considered more thoroughly which investors and business models were likely to maximize direct and indirect employment.

• Large land allocations did not necessarily create the most jobs per hectare.

• Outgrower schemes could be effective in supporting livelihoods while allowing people to retain their most valuable asset—their land.

• Governments should have considered the whole value chain and promoted the downstream value addition of the raw materials produced from land made available, thereby maximizing employment and other benefits.

• With the arrival of an investment, many communities underwent a period of rapid transition with potential for both positive and negative consequences.

• There could be redistributive effects and a creation of insider-outsider status as some people would benefit from the investment but others may not, and may indeed create difficulties due to impacts such as rising prices.

• The extent of positive economic spillovers from large-scale investments varied widely and depended on the investor’s busi- ness model and procurement plans.

• Governments should recognize the risk that the employment benefits may diminish over time as production becomes more mechanized.

Transparency • In general, there was an insufficient amount of publicly available information to ensure the fully transparent and accountable conduct of agricultural investment.

Technology transfer • Technology transfer was by no means an assured benefit.

• Appropriate, proven and customized use of innovation in new crops, business models, and techniques should have been encouraged to reduce risks.

• The types of technology transferred should be contextualized to fit with available levels of finance, skills, equipment or experience/capabilities.

Social and infrastructure service

• Even though investors may provide and support social services to the communities, governments need to maintain the primary responsibility in social and infrastructure services provision.

(continued)

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C. SELECTED KEY LESSONS FOR LOCAL COMMUNITIES AND CIVIL SOCIETY Consultations

between investors and communities

• Representatives of civil society played a useful role in monitoring consultations and could work with investors to ensure that all relevant communities and stakeholders were included within the consultation process.

• There were instances where agreements were not documented, leading to confusion and disputes.

While recognizing a capacity gap, local communities should have ensured that all agreements and commitments made through consultations wee documented.

• Investors said it was easier to include local communities which were well-organized. NGOs could assist local communities in this regard.

Monitoring investors

• Civil society could play a role in monitoring conflicts between investors and stakeholders or instances where an investment was degrading natural resources, e.g., in making those issues public or known to relevant authorities.

• Monitoring led to positive outcomes when conducted in a constructive, rather than antagonistic, fashion.

Engagement with investors

• Civil society could forge partnerships with the private sector to stimulate responsible inclusive investments that gave due consideration to reduction of rural poverty and more equitable benefit sharing with farmers and the local communities.

• The most successful social development programmes were those that were done in collaboration with NGOs or other organizations (e.g., workers unions) who were able to directly connect these programmes with local needs.

Marginalised communities and groups

• NGOs could play a key role in helping investors to forge partnerships with marginalized groups including women and youth, for example:

help them link with outgrower schemes

strengthen their technical and production capacity

advocate that their needs were considered when deciding social development programmes.

• Some NGOs were effective in raising community awareness regarding their rights and how to exer- cise them, as well as ensuring that people had a realistic assessment of the value of their land in the case of resettlement.

Rural livelihoods • Civil society could partner with investors to provide trainings such as financial literacy or vocational training, to enable communities to benefit from new opportunities.

Technology transfer • Civil society could facilitate partnerships with investors to provide vocational training to assist communities, especially outgrowers, with the adoption of new technology and inputs.

Note: This table extends the key lessons presented in Table 7.1 of the first report (UNCTAD and World Bank 2014), building on the additional information, insights and lessons gleaned from the second, follow-up fieldwork.

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A. MAIN POSITIVE

IMPACTS POLICIES AND PRACTICES TO REDUCE NEGATIVE AND ENHANCE POSITIVE IMPACTS

HOST GOVERNMENT INVESTOR

DIRECT EMPLOYMENT CREATION

• Job creation is a main benefit of investments.

• Most employees are satisfied with pay and conditions and felt better off due to the job.

• The income from employment or contract farming provides future opportunities such as savings and investments in fixed assets, land improvement and education.

• Training is a key benefit investors can provide.

• Provision of employment opportunities for unskilled people, especially women, can have a transformative socioeconomic impact.

• Seek job creation and training commitments from potential investors.

• Consider business models or crops that create most jobs per hectare of land allocated.

• Screen investors on type of employment (permanent/casual), who is employed (locals, women) and duration of job creation, not just aggregate job numbers.

• Screen investors on quality of manage- ment and approach to recruitment and employment terms and conditions.

• Ensure adequate living wages are paid.

• Consider gender balance, employment-related gender issues and empowering women.

• Provide clear explanation about recruitment process and employment conditions.

• Staff handbook and induction programmes are useful and should be adapted to local conditions.

• Enforce occupational health and safety regulations.

• Establish clear and effective grievance mechanisms.

• Provide opportunities to switch casual workers into perma- nent contracts.

• Train local communities, especially women, to assist integration into workforce.

• Provide training programmes for workers including induc- tion courses, occupational health and safety, business under- standing, HIV awareness (where required), retirement savings, chemical application and machine operation.

• Partner with civil society such as NGOs and universities to provide training.

ACCESS TO MARKETS AND OTHER PARTS OF VALUE CHAINS FOR OUTGROWERS

• Reliable and suitable market for farmers’ produce contributed to improving livelihoods.

• Outgrowers appreciated technical support, access to finance, and higher prices as compared to other buyers.

• Select when feasible, investors with outgrower schemes that have a proven business model.

• Consider both positive and negative con- sequences of encouraging shift through outgrower scheme from traditional crops to cash crops (such as income-sensitivity to commodity prices).

• Consider how schemes can be designed to reach most marginalized farmers.

• Resolve the business model before introducing outgrowers.

• Ensure transparent and inclusive price determination.

• Create dedicated outgrowers training develop- ment programmes, including through partnerships with NGOs and farmers’ associations.

• Support may be required for outgrowers’ financial capacity to participate in outgrower schemes. Funding and partner- ships with various stakeholders such as local governmental agencies or experienced NGOs can play an important role.

• The investor should ensure that its operations are not detri- mental to existing sources of food security.

SOCIAL DEVELOPMENT PROGRAMMES

• Trend toward social development programmes, including social services (for example, education, health and water), rural infrastructure, or improving access to finance.

• Consider investors’ social and rural development commitments when prescreening and selecting investors.

• Negotiate with investors on the benefits to be provided to the host country.

• Retain primary responsibility for social and infrastructure services.

• Consult on and discuss local development visions when designing social and rural development programmes.

• Formally committed arrangements.

• Consider training on financial literacy including how to deal with rising incomes and save for retirement.

• If financially feasible, set up a dedicated Commu- nity Development Fund.

• Any changes to programmes arising from changes to finan- cial circumstances must be clearly communicated to the affected communities.

TAbLE 1.2. updaTed

^a

recommendaTIon: exampLe poLIcIeS and pracTIceS To maxImIze poSITIve ImpacTS and reduce negaTIve rISkS and ImpacTS

(a) Updated information is highlighted in italic.

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A. MAIN POSITIVE

FINANCIALLY INCLUSIVE BUSINESS MODELS

• Explicit sharing of financial gains with local communities, (for example, revenue sharing) effective in forging genuine partnerships.

• Promote financially inclusive business models.

• Consider whether financially inclusive business model can be employed.

FOOD AND NUTRITION SECURITY

• Income effect of direct employment and access to markets for outgrowers.

• Consider both positive and nega- tive food security implications of investment.

• Ensure investments are not detri- mental to existing sources of food security for example, through reduced land access by local population.

• Ensure adequate living wages are paid and outgrower produce is sufficiently remunerated.

• Ensure sufficient land with suitable potential for food crop production is available to local population.

TECHNOLOGY TRANSFER AND INNOVATION

• Foreign investors can be instru- mental in introducing and encouraging the adoption of new technology and farming practices.

• In select instances, foreign technology transfer had a catalytic effect which generated benefits far beyond the investor.

• Technology transfer most commonly occurs through training of outgrowers.

• Encourage investors with schemes or intention to introduce improved technology or farming practices in an economical and sustainable manner.

• Encourage innovation appropriate to the context.

• New business models, crops or techniques should be piloted and only employed at large scale once the model is proved and stable.

• Provide knowledge transfer through formal training, on-the- job field training, informal meetings and visits to projects including demonstrations farm.

• Develop a “model farmers system” in which the company provides experts to train selected local farmers as models in ways to increase productivity.

• Establish demonstration plots to show better practices to grow crops and organize regular on-site visits for local farmers to promote information exchange.

• Identify gaps in knowledge, specific training needs and gaps in capital requirements to adopt the requisite technologies.

• Consider to provide linkages to microfinance institutions to support outgrowers pay for technology and inputs.

• Partner with other stakeholders such as local training agen- cies, farmers’ associations, NGOs and governments to develop a programme enabling technology transfer.

INFRASTRUCTURE PROVISION

• Development of roads, electricity, and telecommunications opens up new areas and improves market access.

• Consider infrastructure provision and potential spillovers when selecting investors.

• Allow benefits of infrastructure development to reach the broader population.

TAbLE 1.2. conTInued

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(continued) A. MAIN POSITIVE

ECONOMIC SPILLOVERS

• Investments can generate both employ- ment and indirect additional business opportunities for small businesses such as restaurants, transport requirements, and agricultural input suppliers.

• Local job opportunities created by invest- ments have a potential to reverse the exo- dus of skilled labor and educated youth from rural areas.

• Investments can raise awareness of a new business opportunity and provide a demonstration effect.

• The rise in incomes produced by an inves- tor can be beneficially invested in the local economy, towards education and skills development or capital development on local farms.

• Spillovers are not automatic. Screen investors based on the business model, procurement plan and potential to gener- ate positive spillovers to other parts of the value chain.

• Undertake proactive urban and rural planning around investments to manage the impact of economic transformation in the area.

• Consider to share or support services and infrastructure such as electricity and roads with local businesses.

• Train local employees in business management.

• Source inputs locally where possible. Establish local busi- ness development plans to improve the capacity of local suppliers.

B. MAIN NEGATIVE IMPACTS

POLICIES AND PRACTICES TO REDUCE NEGATIVE AND ENHANCE POSITIVE IMPACTS

DISPUTES OVER ACCESS TO LAND

• Range of disputes from involuntary displacement to uncertainty about investor intentions.

• Common conflict between formal rights provided to investor and informal rights of previous users of the land.

• Unclear land laws create situations of conflict over land rights, especially when customary land is concerned.

• Clear regulatory and transparent framework for land acquisition approvals.

• Consider formalizing local communities’ tenure rights under proper registry system.

• Encourage business models with low land needs.

• Early engagement with local communities and all land users and consultation on existing rights and usage.

• Understand the historical and current use of and rights to land based on own assessments and veri- fication of government assessments.

• Consider to purchase land on a “willing-buyer, willing- seller” basis.

LACK OF CLARITY OVER LAND ACQUISTION PROCESS

• Lack of public information dis- empowers local communities and hinders ability to hold investors to account.

• Publicize land applications under review and approved, including on investment registry website.

• Consider what information on operations can be made publicly available.

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B. MAIN NEGATIVE

RESETTLEMENT

• Despite some well-handled cases, negative experiences of displacement without sufficient consultation, negotiation or compensation.

• Inadequate compensation includes cases that replacement land was not equivalent in terms of soil quality, suitability for agriculture and access to social services such as clinics.

• Lengthy delays in the resettlement process were experienced.

• Develop required procedures to follow and standard valuations for compensation purposes.

• Have policies, and support mechanisms to help resettled populations deal with the socioeconomic consequences of the reset- tlement, including how to productively invest the money received lump-sum as compensation payment.

• Consider leaving communities in situ as first option.

• Follow a transparent, formal, inclusive, monitored process for resettlement;

have a clear strategy for land allocation

conduct proper consultation

set up clear communication channels and strategies between various stakeholders’ agreement on compensation

build transparent systems to monitor and control the pay- ment of compensation.

• Ensure full documentation and audit of existing land plots, crops, houses and structures. Compensation according to negotiated and agreed compensation rates.

• Proper witnessing and recording of compensation payments.

• Set and manage expectations through the consultation process.

• Give people the choice, for instance building their own houses with materials provided or building houses for them.

• Consider to put in place a system for voluntary relocation.

• Ongoing dialogue and follow-up audit after the resettlement has taken place.

LACK OF CONSULTATION AND INCLUSION

• Lack of involvement of local communities in decision making and planning led to a sense of exclusion and precluded mutually beneficial solutions.

• Unfulfilled commitment, especially with regard to jobs or community development plans, resulted in deteriorated relations.

• Clear regulatory framework on consultation procedures.

• Monitor consultations conducted by investors and assess/act on; do not conduct them on investors’

behalf to avoid misunderstanding and miscommunication with stakeholders.

• Consult with local communities, including infor- mal users of the land, from the outset.

• Develop continuous dialogue with local communities.

• Document all meetings and agreements.

• Manage community expectations through a transparent community engagement strategy.

• Keep communities updated on developments by ongoing communications, including financial developments to the extent that may affect commitments made to them, such as funding of the community development agreement, providing jobs or purchasing from outgrowers.

• Free, prior and informed consent (FPIC), is vital not only for the investments associated with large-scale land acquisi- tion but also any other types of investments.

• The consultation and communication of information needs to take place before, during and after the process.

TAbLE 1.2. conTInued

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(continued) B. MAIN NEGATIVE

FAILURE TO USE LAND AS EXPECTED

• Some investors used a low portion of allocated land, including land from which people had been resettled, creating tension with local communities and host countries.

• Prescreen investors to ensure they have capacity to develop land as expected.

• Seek commitments for pace of development and retain authority to repossess land not put to use.

• Consider to request investors to phase their projects.

• Acquire land in accordance with ability to develop it.

• Set expectations about the pace of development through consultations.

FINANCIAL OR

OPERATIONAL FAILURE OF INVESTOR

• Many investors experienced opera- tional or financial difficulty.

• Most obstacles encountered could have been identified by adequate pre-investment due diligence.

• Failure of investment created lose- lose situation for investors, host countries and local communities.

• Prescreen investors’ financial strength (for instance, capital structure and who are its backers), technical abilities, approach to Environ- mental and Social Impact Assess- ments and consultations, and commitments for benefits to the host country.

• Only approve investments at a pace that matches capacity to prescreen and monitor.

• Consider to prioritizing investors who have long-term practical experience and successful track records in agribusinesses in developing countries.

• Governments can receive support on pre- screening from financial institutions with solid experience in financing agricultural investments.

• Create an enabling policy environment for successful investments.

• Monitor investors and have a well- designed exit strategy.

• Consider phasing the investment.

• Create own business plan and conduct due diligence.

• Incorporate findings from consultations and impact assessments into planning.

• Ensure patient and long-term sources of capital from end investors who are cognizant of risks of agribusiness and who see the project as integral rather than incidental to the portfolio of their portfolio.

LACK OF GRIEVANCE AND REDRESS MECHANISMS

• Those negatively affected by an investment often did not have sufficient means to raise grievances and seek redress.

• Where employees feel comfortable raising grievances with management, better rela- tions and a more positive working environ- ment are fostered.

• Facilitate and ensure estab- lishment of formal grievance procedures.

• Monitor their operationalization and hold investors accountable.

• Establish formal and effective grievance procedures open to both staff and external stakeholders.

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B. MAIN NEGATIVE

ENVIRONMENTAL IMPACTS, INCLUDING WATER

• Assessment, monitoring and miti- gation of environmental impact, especially impact on water, was generally inadequate.

• Require and monitor the conduct of Environmental and Social Impact Assessments and effective implementation of Environmental and Social Management Plans.

• Monitor and enforce adherence to environmental and water regulation.

• Undertake appropriate Environmental and Social Impact Assessments. Translate those into Envi- ronmental and Social Management Plans which are enforced through ongoing reporting and monitoring.

• Adhere to environmental and water regulation.

• Implement infrastructure changes to mitigate negative impact, such as airborne pollution or water contamination.

• Training for the proper use of chemicals and information on the consequences of their misuse should be clearly provided or communicated to employees and the local community.

• Support community initiatives to conserve the environment, as part of the Environmental and Social Management Plan.

• Awareness rising of environmental issues could include combining efforts with other stakeholders, such as civil soci- ety and government institutions, as well as supporting local initiatives.

TAbLE 1.2. conTInued

Note: This table extends the policies and practices referred to in Appendix B of the first report (UNCTAD and World Bank 2014), based on the key findings of the second fieldwork (Table 1.1).

Updated voices from the field

THE iMPAcT Of LARGER-scALE AGRicULTURAL iNvEsTMENTs ON LOcAL cOMMUNiTiEs:

Updated voices from the field

The ImpacT of Larger- ScaLe agrIcuLTuraL

InveSTmenTS on LocaL communITIeS:

updated voices from the field

FOOD AND AGRICULTURE GLOBAL PRACTICE DISCUSSION PAPER 12

April 2017

Contents

acknowLedgmenTS

LIST of abbrevIaTIonS

ChAPTER OnE

InTroducTIon and key fIndIngS

1.1 background and objecTIveS

bOX 1.1. key pubLIcaTIonS and ouTpuTS by The Iawg on reSponSIbLe agrIcuLTuraL InveSTmenT

1.2 daTa coLLecTIon and meThodoLogy

bOX 1.2. SeLecTed InTernaTIonaLLy recognIzed prIncIpLeS and guIdeLIneS for reSponSIbLe agrIcuLTuraL InveSTmenT

30 63

20

FIGURE 1.1. deScrIpTIve STaTISTIcS of STakehoLderS InTervIewed

1.3 key fIndIngS and recommendaTIonS

bOX 1.3. defInITIon of STakehoLderS In ThIS reporT

Table 1.1. Updated

key lessons for investors, host governments and other stakeholders

TAbLE 1.1. conTInued

TAbLE 1.2. updaTed

recommendaTIon: exampLe poLIcIeS and pracTIceS To maxImIze poSITIve ImpacTS and reduce negaTIve rISkS and ImpacTS

TAbLE 1.2. conTInued

TAbLE 1.2. conTInued

TAbLE 1.2. conTInued